HPM Executive: Preconstruction Services Help Tamp Down Construction Costs
Del Buck, vice president of preconstruction at Hoar Program Management (HPM), an affiliate firm of Birmingham, Ala.-based Hoar Construction, has the challenge of saving construction costs in the face of a significant labor shortage that’s hobbled the construction industry.
According to research from Federal Reserve Economic Data (FRED), 1.5 million construction jobs were lost during the Great Recession. While the industry is still working to fill the void, labor and materials costs have increased dramatically. Turner Construction Co. reports that construction costs have increased 5.9 percent since 2018.
Buck emphasizes the importance of developers and owners not accepting the “false premise” that construction costs are outside of their control. Instead, he says that costs can be salvaged using third-party project management firms during the planning stages. These firms can provide preconstruction services, which help stakeholders realize the scope, costs and schedule of a project before breaking ground. Outside of cost savings on the front end, he says owners and developers can also benefit from program management firms as they can help mitigate costs once construction is already underway.
Buck spoke with REBusinessOnline about the ever-changing construction industry, outlining his firm’s creative workarounds for lowering costs. What follows is an edited interview:
REBusinessOnline: Do most developers and project owners appreciate or even understand the value of preconstruction?
Buck: Through our experience, we find that many developers and owners that are trying to execute a major capital project often feel that they are at the mercy of an architect and general contractor and will resign themselves to paying whatever number shows up on a budget estimate. Very often, it’s because of a lack of understanding or awareness about the existence of program management firms that can provide value beyond fees by keeping a project within budget and on schedule.
Preconstruction sets the table for a successful project and makes the entire building process easier for the owner. A good preconstruction provider will organize and lead a variety of tasks, including site selection, budget drafts and reviews, solicit bids for architects and general contractors, construction document approval and financing.
REBO: What advice can you give about pricing a project?
Buck: Having a firm understanding of the market is the key to providing accurate pricing. Analyzing the availability of labor, trade partners and even the willingness of general contractors to bid all make a significant impact on the accuracy of the budget. When a market is hot, the resources needed to execute a successful project are going to be limited. HPM and similar firms perform a risk analysis that assesses the various stresses on the market and potential budget risks and then compare to historical pricing on projects across the country. This enables the project management firm to craft a budget that is going to be realistic, efficient and far less likely to be sidetracked by cost overruns and other problems.
Giving stakeholders conceptual budgets during the preconstruction process helps them understand every factor involved. If they later find that the budget is getting out of line, firms can conduct value engineering reviews to determine what costs can be decreased without affecting the overall functionality of the building. It’s important to be flexible and prepared enough to hit a moving target based on what the pricing is likely to be.
REBO: What are some projects your firm has done that have benefitted from preconstruction services?
Buck: Airbus recently engaged HPM to provide preconstruction and program management services in Mobile, Ala., for the design and construction of the company’s new A220 assembly line that follows airline-industry requirements for smaller, more efficient aircraft that also feature larger seats and ample leg room to satisfy consumer demands.
We tapped The Mott MacDonald Group, an engineering and development firm that also partnered with us on Airbus’ A320 manufacturing facility, to draft a master plan and help us assemble the design and construction teams for the project.
We are designing while building while also prepping for equipment to be installed so that as soon as those items are approved, we can coordinate with the operations team to bring aircraft through the facility. There are a lot of moving parts all at once, but that just comes with the territory when you’re working with a major industry player like Airbus.
REBO: What else should developers and owners know about preconstruction work?
Buck: With the ongoing labor shortage and continual price spikes for materials, owners now more than ever need advisors that have the expertise and proven experience. This allows them to navigate through all of the potential budget pitfalls and generate a meaningful return at the end of the day. Owners that invest in preconstruction on the front end usually see that expense pay for itself through the savings that are ultimately realized. Third-party program management providers also offer a unique aspect to preconstruction in audit and contract services, which helps the owner navigate through the project team’s procurement process by crafting and negotiating contracts.
REBO: What is your outlook for the importance of preconstruction services going forward?
Buck: Our peers in the industry, as well as HPM, are in expansion mode as more owners and developers gain an awareness and understanding of how preconstruction services can benefit their bottom line. It’s a great time to be in our line of work, and we anticipate that preconstruction will become more mainstream as we enter the next decade.